LOAN NUMBER 3793 KO

Loan Agreement

(Ports Development and Environmental Improvement Proj ect)

between

REPUBLIC OF KOREA

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

Dated M 63 , 1994

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IDA NDMBER 3793 KO

LOAN AGREEMENT

AGREEMENT, dated t0*tA&Hk- 03 , 1994, between REPUBLIC OF

KOREA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND

DEVELOPMENT (the Bank).

WHEREAS the Borrower, having satisfied itself as to the

feasibility and priority of the Project described in Schedule 2 tothis Agreement, has requested the Bank to assist in the financing ofthe Project; and

WHEREAS the Bank has agreed, on the basis, inter alia, of the

foregoing, to extend the Loan to the Borrower upon the terms andconditions set forth in this Agreement.

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The "General Conditions Applicable to Loan and

Guarantee Agreements" of the Bank, dated January 1, 1985, with the

modifications set forth below (the General Conditions) constitute anintegral part of this Agreement:

(a) The last sentence of Section 3.02 is deleted.

(b) In Section 6.02, sub-paragraph (k) is re-lettered as

sub-paragraph (1) and a new sub-paragraph (k) is added to read:

"(k) An extraordinary situation shall have arisen

under which any further withdrawals under theLoan would be inconsistent with the provisionsof Article III, Section 3 of the Bank's Articles

of Agreement."

Section 1.02. Unless the context otherwise requires, the

several terms defined in the General Conditions have the respective

meanings therein set forth and the following additional terms have

the following meanings:

(a) "MOST" means the Borrower's Ministry of Science and

Technology;

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(b) "KMPA" means the Korea Maritime Port Administration, acentral administrative organ of the Borrower under the jurisdictionof the Borrower's Ministry of Transportation;

(c) "KCTA" means the Korea Container Terminal Authority,established and operating under the control of KMPA pursuant to theBorrower's Law No. 4191 dated December 30, 1989;

(d) "1973/78 MARPOL Convention" means the InternationalConventic, for the Prevention of Pollution from Ships;

(e) ."Special Account" means the account referred to inSection 2.02 (b) of this Agreement;

(f) "Affected Person" and "Affected Persons" meanindividually the person or entity and collectively the persons orentities whose right, title or interest in any property, business,occupation or work is acquired or terminated or is intended to beacquired or terminated or whose property is otherwise possessed orintended to be possessed and who, as a result thereof, has been orwould be displaced or dispossessed from his/their habitat or land orprecluded from carrying out his/their business, occupation or workon account of the execution of Part B (iii) of the Project; and

(g) "Category" means a withdrawal category set forth in thetable in paragraph 1 of Schedule 1 to this Agreement.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on theterms and conditions set forth or referred to in this Agreement,various currencies that shall have an aggregate value equivalent to

the amount of one hundred million dollars ($100,000,000), being thesum of withdrawals of the proceeds of the Loan, with each withdrawalvalued by the Bank as of the date of such withdrawal.

Section 2.02. (a) The amount of the Loan may be withdrawn fromthe Loan Account in accordance with the provisions of Schedule 1 to

this Agreement for expenditures made (or, if the Bank shall so

agree, to be made) in respect of the reasonable cost of goods, worksand services required for the Project described in Schedule 2 to

this Agreement and to be financed out of the proceeds of the Loan.

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(b) The Borrower shall, for the purposes of the Project,open and maintain in the Korea Exchange Bank a special depositaccount in United Stated dollars on terms and conditionssatisfactory to the Bank, including appropriate protection againstset-off, seizure or attachment. Deposits into, and payments out of,the Special Account shall be made in accordance with the provisionsof Schedule 5 to this Agreement.

Section 2.03. The Closing Date shall be December 31, 2000 orsuch later date as the Bank shall establish. The Bank shall promptlynotify the Borrower of such later date.

Section 2.04. The Borrower shall pay to the Bank a commitmentcharge at the rate of three-fourths of one percent (3/4 of 1%) perannum on the principal amount of the Loan not withdrawn from time totime.

Section 2.05. (a) The Borrower shall pay interest on theprincipal amount of the Loan withdrawn and outstanding from time totime, at a rate for each Interest Period equal to the Cost ofQualified Borrowings determined in respect of the precedingSemester, plus one-half of one percent (1/2 of 1%). On each of thedates specified in Section 2.06 of this Agreement, the Borrowershall pay interest accrued on the principal amount outstandingduring the preceding Interest Period, calculated at the rateapplicable during such Interest Period.

(b) As soon as practicable after the end of each Semester,the Bank shall notify the Borrower of the Cost of QualifiedBorrowings determined in respect of such Semester.

(c) For the purposes of this Section:

(i) "Interest Period" means a six-month periodending on the date immediately preceding eachdate specified in Section 2.06 of thisAgreement, beginning with the Interest Period inwhich this Agreement is signed.

(ii) "Cost of Qualified Borrowings" means the cost,as reasonably determined by the Bank andexpressed as a percentage per annum, of theoutstanding borrowings of the Bank drawn downafter June 30, 1982, excluding such borrowingsor portions thereof as the Bank has allocated to

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fund: (A) the Bank's investments; and (B) loanswhich may be made by the Bank after July 1, 1989bearing interest rates determined otherwise thanas provided in paragraph (a) of this Section.

(iii) "Semester" means the first six months or thesecond six months of a calendar year.

(d) On such date as the Bank may specify by no less than sixmonths' notice to the Borrower, paragraphs (a), (b) and (c) (iii) ofthis Section shall be amended to read as follows:

"(a) The Borrower shall pay interest on theprincipal amount of the Loan withdrawn and outstandingfrom time to time, at a rate for each Quarter equal tothe Cost of Qualified Borrowings determined in respectof the preceding Quarter, plus one-half of one percent(1/2 of 1%). On each of the dates specified in Section2.06 of this Agreement, the Borrower shall pay interestaccrued on the principal amount outstanding during thepreceding Interest Period, calculated at the ratesapplicable during such Interest Period."

" (b) As soon as practicable after the end ofeach Quarter, the Bank shall notify the Borrower of theCost of Qualified Borrowings determined in respect ofsuch Quarter."

"(c) (iii) 'Quarter' means a three-month periodcommencing on January 1, April 1, July 1 or October 1 ina calendar year."

Section 2.06. Interest and other charges shall be payablesemiannually on April 1 and October 1 in each year.

Section 2.07. The Borrower shall repay the principal amount ofthe Loan in accordance with the amortization schedule set forth inSchedule 3 to this Agreement.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower declares its commitment to theobjectives of the Project as set forth in Schedule 2 to thisAgreement, and, to this end:

(i) shall: (A) through KMPA, carry out Parts A, B, C and E(ii) through E (v) of the Project; (B) through KCTA,carry out Part D of the Project; and (C) through MOST,carry out Part E (i) of the Project, all with duediligence and efficiency and in conformity withappropriate administrative, environmental, engineering,ports and financial practices, and shall provide,promptly as needed, the funds, facilities, services andother resources required for the Project;

(ii) without limitation upon the provisions of paragraph (a)(i) of this Section and except as the Borrower and theBank shall otherwise agree, the Borrower shall carryout, through KMPA, Parts A, B, C and E (ii) through E(v) of the Project in accordance with the ImplementationProgram set forth in Section I of Schedule 6 to thisAgreement; and

(iii) without limitation upon the provisions of paragraph (a)(i) of this Section and except as the Borrower and the

Bank shall otherwise agree, the Borrower shall carryout, through KCTA, Part D of the Project in accordancewith the Implementation Program set forth in Section II

of Schedule 6 to this Agreement.

(b) In the event that during Project implementation theBorrower shall decide to entrust private sector firms to carry out

the work under Part B (iii) of the Project, the Borrower undertakes,without limitation to the provisions of paragraph (a) of this

Section, to make arrangements satisfactory to the Bank, through KMPAand Pusan City, with such private firms, including the prompt

issuance by the City of Pusan of the required approvals and permits.

Section 3.02. Except as the Bank shall otherwise agree,

procurement of the goods, works and consultants' services required

for Parts A, B (i), B (ii), C, D and E of the Project and to be

financed out of the proceeds of the Loan shall be governed by theprovisions of Schedule 4 to this Agreement.

Section 3.03. The Borrower shall ensure that the resettlementand rehabilitation of the Affected People shall be carried out inaccordance with the following principles and objectives:

(a) Affected People shall be consulted and participate inthe design and implementation of the resettlement activities;

(b) at least thirty days prior to their displacement eachAffected People shall be provided with a compensation package,in cash and/or in kind, sufficient to ensure that eachAffected People shall improve, or at least regain, thestandard of living and means of livelihood they were enjoyingprior to their displacement; and

(c) each compensation package shall include: (i)compensation for the assets lost, at least, at replacementcosts; and (ii) adequate subsistence allowances during thetransition period of resettlement.

Section 3.04. Without limitation upon the provisions ofArticle IX of the General Conditions, the Borrower shall:

(a) prepare and furnish to the Bank not later than six (6)months after the Closing Date or such later date as may be agreedfor this purpose between the Borrower and the Bank, a plan, of suchscope and in such detail as the Bank shall reasonably request, forthe future operation of the Project;

(b) afford the Bank a reasonable opportunity to exchange viewswith the Borrower on said plan; and

(c) thereafter, carry out said plan with due diligence andefficiency and in accordance with appropriate practices, taking intoaccount the Bank's comments thereon.

ARTICLE IV

Financial Covenants

Section 4.01. (a) The Borrower shall maintain or cause to be

maintained records and accounts adequate to reflect in accordancewith sound accounting practices the operations, resources and

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expenditures in respect of the Project of the departments oragencies of the Borrower, including KMPA and each District MaritimePort Administration and KCTA, responsible for carrying out theProject or any part thereof.

(b) The Borrower shall:

(i) have the records and accounts referred to inparagraph (a) of this Section including thosefor the Special Account for each fiscal yearaudited, in accordance with appropriate. auditingprinciples consistently applied, by independentauditors acceptable to the Bank;

(ii) furnish to the Bank as soon as available, but inany case not later than six months after the endof each such year, the report of such audit bysaid auditors, of such scope and in such detailas the Bank shall have reasonably requested; and

(iii) furnish to the Bank such other informationconcerning said records and accounts and theaudit thereof as the Bank shall from time totime reasonably request.

(c) For all expenditures with respect to which withdrawalsfrom the Loan Account were made on the basis of statements ofexpenditure, the Borrower shall:

(i) maintain or cause to be maintained, inaccordance with paragraph (a) of this Section,records and accounts reflecting suchexpenditures;

(ii) retain, until at least one year after the Bankhas received the audit report for the fiscalyear in which the last withdrawal from the LoanAccount or payment out of the Special Accountwas made, all records (contracts, orders,invoices, bills, receipts and other documents)evidencing such expenditures;

(iii) enable the Bank's representatives to examinesuch records; and

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(iv) ensure that such records and accounts areincluded in the annual audit referred to inparagraph (b) of this Section and that thereport of such audit contains a separate opinionby said auditors as to whether the statements ofexpenditure submitted during such fiscal year,together with the procedures and internalcontrols involved in their preparation, can berelied upon to support the related withdrawals.

Section 4.02. The provisions of Section 4.02 of the LoanAgreement entered into between the Republic of Korea and the Bankdated August 6, 1986 in respect of Loan No. 2726-KO (Pusan PortProject) is hereby deleted in its entirety.

ARTICLE V

Effective Date; Termination

Section 5.01. The date ninety (90) days after the date of thisAgreement is hereby specified for the purposes of Section 12.04 ofthe General Conditions.

ARTICLE VI

Representative of the Borrower; Addresses

Section 6.01. The Minister of Finance of the Borrower isdesignated as representative of the Borrower for the purposes ofSection 11.03 of the General Conditions.

Section 6.02. The following addresses are specified for the

purposes of Section 11.01 of the General Conditions:

For the Borrower:

Ministry of FinanceRepublic of Korea

Kwachon, Korea

Cable address: Telex:

MOF K23243

Kwachon, Korea

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For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.

Washington, D.C. 20433

United States of America

Cable address: Telex:

INTBAFRAD 248423 (RCA),Washington, D.C. 82987 (FTCC),

64145 (WUI) or197688 (TRT)

IN WITNESS WHEREOF, the parties hereto, acting through theirduly authorized representatives, have caused this Agreement to besigned in their respective names in the District of Columbia, UnitedStates of America, as of the day and year first above written.

REPUBLIC OF KOREA

By

Authorized Representative

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

Regional Vice PresidentEast Asia and Pacific

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SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The taole below sets forth the Categories of items to befinanced out of the proceeds of the Loan, the allocation of theamounts of the Loan to each Category and the percentage of expendi-tures for items so to be financed in each Category:

Amount of theLoan Allocated % of

(Expressed in ExpendituresCatecor Dollar Equivalent) to be Financed

(1) Civil works 52,000,000 35%under Parts B (i)

and B (ii) of theProject

(2) Equipment under: 100% of foreign

expenditures,(a) Parts A and C 15,500,000 100% of local

of the expendituresProject (ex-factory cost)

and 75% of local

expenditures for

(b) Part D of 30,000,000 other items pro-the Project cured locally

(3) Consultants' 2,500,000 100%

services andtraining underPart E ofthe Project

TOTAL 100,000,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures inthe currency of any country other than that of the Borrower forgoods or services supplied from the territory of any country other

than that of the Borrower; and

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(b) the term "local expenditures" means expenditures in thecurrency of the Borrower or for goods or services supplied from theterritory of the Borrower.

3. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made in respect of:

(a) Category (1) unless the Borrower has furnished to theBank evidence satisfactory to the Bank that the Borrower's Ministryof Environment has provided its environmental clearance to the

carrying out of Part B of the Project; and

(b) payments made for expenditures prior to the date of thisAgreement, except that withdrawals, in an aggregate amount not to

exceed $200,000, may be made in respect of Category (3), on accountof payments made for expenditures before that date but after April

19, 1994.

4. The Bank may require withdrawals from the Loan Account to be

made on the basis of statements of expenditure for expenditures for(a) goods and works under contracts not exceeding $300,000equivalent; (b) services of consulting firms under contracts notexceeding $100,000 equivalent; (c) services of individual

consultants under contracts not exceeding $50,000 equivalent; and

(d) training regardless of the cost thereof, all under such terms

and conditions as the Bank shall specify by notice to the Borrower.

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SCHEDULE 2

Description of the Project

The objectives of the Project are to assist the Borrower to:(a) mitigate the adverse environmental effects caused in the Koreanmaritime transport; (b) reduce air pollution, level of noise andtraffic congestion in the City of Pusan; and (c) strengthen KMPA'scapacity to adequately address environmental issues in maritime portdevelopment and operation.

The Project consists of the following parts, subject to suchmodifications thereof as the Borrower and the Bank may agree uponfrom time to time to achieve such objectives:

PART A: Construction of facilities in selected maritime ports ofthe Borrower for the collection, storage, treatment and disposal ofliquid wastes, garbage and sewage from ships covered by the 1973/78MARPOL Convention.

Part B: Construction of a maritime port-cum-industrial complexat Dadaepo located on the outskirts of the City of Pusan including:(i) a breakwater; (ii) dredging, preparation and maintenance of theaccess channel; (iii) reclamation works, about 2000 meters of linerwharves and the required infrastructure for the establishment of anadjacent industrial complex to house existing timber and marineproduct processing plants and other industrial plants located in theCity of Pusan, including resettlement and rehabilitation of the

Affected Persons.

PART C: Design and installation of a vessel traffic management

system to monitor, regulate and control the movements of maritimevessels at selected maritime ports, including the ports of Pusan andInchon/Asan.

PART D: Construction of four container berths in the maritimeport of Pusan, about 1,400 meters long, each berth capable of

accommodating vessels of about 50,000 DWT, and each to include a

supporting container stacking area, a container freight station, twoquay side container cranes, a maintenance shop and a terminal

office.

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PART E: (i) Development and operation of a comprehensive programfor maritime monitoring and assessment of the Yellow Sea's largemarine ecosystem, including provision of equipment and training,inter alia, for staff of the Korea Ocean Research and DevelopmentInstitute.

(ii) Carrying out of a study to formulate and evaluate

investment options, policies and strategies for purposes of carryingout Part A of the Project, including detailed engineering.

(iii) Carrying out of a comprehensive training program toenhance the knowledge of KMPA staff on environmental aspects ofmaritime port development, construction and operation.

(iv) Carrying out of a maritime port engineering andoperational training program for staff of KMPA.

(v) Strengthening of KMPA institutional capability throughthe development of: (a) a system to privatize the multi-purposeterminals at the Borrower's 27 maritime international ports; (b) animproved system of performance agreements with various terminaloperating companies; (c) measures to enhance management and

coordination of the Borrower's maritime environmental improvementprogram; and (d) standard operating procedures and engineeringdesigns for the retrofit of existing maritime port facilities tominimize the pollution caused by their operations.

The Project is expected to be completed by December 31,

1999.

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SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

On each April 1 and October 1

beginning April 1, 2000through April 1, 2009 5,000,000

and on October 1, 2009 5,000,000

*The figures in this column represent dollar equivalents determined

as of the respective dates of withdrawal. See General Conditions,

Sections 3.04 and 4.03.

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Premiums on Prepayment

Pursuant to Section 3.04 (b) of the General Conditions, thepremium payable on the principal amount of any maturity of the Loan

to be prepaid shall be the percentage specified for the applicable

time of prepayment below:

Time of Prepayment Premium

The interest rate

(expressed as apercentage per annum)applicable to the Loan

on the day of prepaymentmultiplied by:

Not more than three years 0.20

before maturity

More than three years but 0.40

not more than six years

before maturity

More than six years but 0.73

not more than 11 yearsbefore maturity

More than 11 years but not 0.87

more than 13 yearsbefore maturity

More than 13 years before 1.00

maturity

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SCHEDULE 4

Procurement and Consultants' Services

Section I. Procurement of Goods and Works

Part A: International Competitive Bidding

1. Except as provided in Part C hereof, goods and works shall beprocured under contracts awarded in accordance with proceduresconsistent with those set forth in Sections I and II of the"Guidelines for Procurement under IBRD Loans and IDA Credits"published by the Bank in May 1992 (the Guidelines).

(a) For fixed-price contracts, the invitation to bid referredto in paragraph 2.13 of the Guidelines shall provide that, whencontract award is delayed beyond the original bid validity period,the successful bidder's bid price will be increased for each week ofdelay by two predisclosed correction factors acceptable to the Bank,one to be applied to all foreign currency components and the otherto the local currency component of the bid price. Such an increaseshall not be taken into account in the bid evaluation.

(b) In the procurement of goods and works in accordance withthis Part A, the Borrower shall use the relevant standard biddingdocuments issued by the Bank, with suc,. modifications thereto as theBank shall have agreed to be necessary for the purposes of theProject. Where no relevant standard bidding documents have beenissued by the Bank, the Borrower shall use bidding documents basedon other internationally recognized standard forms agreed with theBank.

2. Bidders for equipment under Part C of the Project and worksunder Parts A and B (i) of the Project shall be prequalified asprovided in paragraph 2.10 of the Guidelines.

Part B: Preference for Domestic Manufacturers

In the procurement of goods in accordance with the proceduresdescribed in Part A.1 hereof, goods manufactured in Korea may begranted a margin of preference in accordance with, and subject to,the provisions of paragraphs 2.55 and 2.56 of the Guidelines andparagraphs 1 through 4 of Appendix 2 thereto.

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Part C: Other Procurement Procedures

1. Goods estimated to cost the equivalent of $300,000 or less percontract, up to an aggregate amount equivalent to $3,000,000, may beprocured under contracts awarded on the basis of competitivebidding, advertised locally, in accordance with procedures

satisfactory to the Bank.

2. Equipment for environmental protection estimated to cost theequivalent of $200,000 or less per contract, up to an aggregateamount equivalent to $3,000,000, may be procured under contractsawarded on the basis of comparison of price quotations obtained fromat least three suppliers from at least three different countrieseligible under the Guidelines, in accordance with proceduresacceptable to the Bank.

Part D: Review by the Bank of Procurement Decisions

1. Review of prequalification:

With respect to the prequalification of bidders as provided inPart A (1) (b) hereof, the procedures set forth in paragraph 1 ofAppendix 1 to the Guidelines shall apply.

2. Review of invitations to bid and of proposed awards and finalcontracts:

(a) With respect to each contract for goods and works

estimated to cost the equivalent of $300,000 or more, the proceduresset forth in paragraphs 2 and 4 of Appendix 1 to the Guidelinesshall apply. Where payments for such contract are to be made out of

the Special Account, such procedures shall be modified to ensurethat the two conformed copies of the contract required to be

furnished to the Bank pursuant to said paragraph 2 (d) shall befurnished to the Bank prior to the making of the first payment out

of the Special Account in respect of such contract.

(b) With respect to each contract not governed by the

preceding paragraph, the procedures set forth in paragraphs 3 and 4

of Appendix 1 to the Guidelines shall apply. Where payments for

such contract are to be made out of the Special Account, said

procedures shall be modified to ensure that the two conformed copiesof the contract together with the other information required to be

furnished to the Bank pursuant to said paragraph 3 shall be

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furnished to the Bank as part of the evidence to be furnishedpursuant to paragraph 4 of Schedule 5 to this Agreement.

(c) The provisions of the preceding subparagraph (b) shall notapply to contracts on account of which withdrawals from the LoanAccount are to be made on the basis of statements of expenditure.

3. The figure of 15% is hereby specified for purposes ofparagraph 4 of Appendix 1 to the Guidelines.

Section II. Employment of Consultants

1. In order to assist the Borrower in carrying out Parts A, B(i), B (ii), C, and E of the Project, the Borrower shall employconsultants whose qualifications, experience and terms andconditions of employment shall be satisfactory to the Bank. Suchconsultants shall be selected in accordance with principles andprocedures satisfactory to the Bank on the basis of the "Guidelinesfor the Use of Consultants by World Bank Borrowers and by the WorldBank as Executing Agency" published by the Bank in August 1981 (theConsultant Guidelines) . For complex, time-based assignments, theBorrower shall employ such consultants under contracts using thestandard form of contract for consultants' services issued by theBank, with such modifications as shall have been agreed by the Bank.Where no relevant standard contract documents have been issued bythe Bank, the Borrower shall use other standard forms agreed withthe Bank.

2. Notwithstanding the provisions of paragraph 1 of this Section,the provisions of the Consultant Guidelines requiring prior Bankreview or approval of budgets, short lists, selection procedures,letters of invitation, proposals, evaluation reports and contractsshall not apply to (a) contracts for the employment of consultingfirms estimated to cost less than $100,000 equivalent each, or (b)contracts for the employment of individuals estimated to cost lessthan $50,000 equivalent each. However, said exceptions to priorBank review shall not apply to (a) the terms of reference for suchcontracts, (b) single-source selection of consulting firms, (c)assignments of a critical nature, as reasonably determined by the

Bank, (d) amendments to contracts for the employment of consultingfirms raising the contracts value to $100,000 equivalent or above,or (e) amendments to contracts for the employment of individualconsultants raising the contract value to $50,000 equivalent or

above.

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SCHEDULE 5

Special Account

1. For the purposes of this Schedule:

(a) the term "eligible Categories" means Categories (1), (2)and (3);

(b) the term "eligible expenditures" means expenditures inrespect of the reasonable cost of goods and services required for

the Project and to be financed out of the proceeds of the Loanallocated from time to time to the eligible Categories in accordancewith the provisions of Schedule 1 to this Agreement; and

(c) the term "Authorized Allocation" means an amountequivalent to $4,000,000 to be withdrawn from the Loan Account and

deposited in the Special Account pursuant to paragraph 3 (a) of thisSchedule.

2. Payments out of the Special Account shall be made exclusively

for eligible expenditures in accordance with the provisions of this

Schedule.

3. After the Bank has received evidence satisfactory to it that

the Special Account has been duly opened, withdrawals of the

Authorized Allocation and subsequent withdrawals to replenish theSpecial Account shall be made as follows:

(a) For withdrawals of the Authorized Allocation, the Borrowershall furnish to the Bank a request or requests for a deposit ordeposits which do not exceed the aggregate amount of the Authorized

Allocation. On the basis of such request or requests, the Bank

shall, on behalf of the Borrower, withdraw from the Loan Account anddeposit in the Special Account such amount or amounts as the

Borrower shall have requested.

(b) (i) For replenishment of the Special Account, the

Borrower shall furnish to the Bank requests for

deposits into the Special Account at such

intervals as the Bank shall specify.

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(ii) Prior to or at the time of each such request, theBorrower shall furnish to the Bank the documentsand other evidence required pursuant toparagraph 4 of this Schedule for the payment orpayments in respect of which replenishment isrequested. On the basis of each such request,the Bank shall, on behalf of the Borrower,withdraw from the Loan Account and deposit intothe Special Account such amount as the Borrowershall have requested and as shall have been shownby said documents and other evidence to have beenpaid out of the Special Account for eligibleexpenditures.

All such deposits shall be withdrawn by the Bank from the LoanAccount under the respective eligible Categories, and in therespective equivalent amounts, as shall have been justified by saiddocuments and other evidence.

4. For each payment made by the Borrower out of the SpecialAccount, the Borrower shall, at such time as the Bank shallreasonably request, furnish to the Bank such documents and otherevidence showing that such payment was made exclusively for eligibleexpenditures.

5. Notwithstanding the provisions of paragraph 3 of thisSchedule, the Bank shall not be required to make further depositsinto the Special Account:

(a) if, at any time, the Bank shall have determined that all

further withdrawals should be made by the Borrower directly from theLoan Account in accordance with the provisions of Article V of theGeneral Conditions and paragraph (a) of Section 2.02 of thisAgreement; or

(b) once the total unwithdrawn amount of the Loan allocated tothe eligible Categories, less the amount of any outstanding special

commitment entered into by the Bank pursuant to Section 5.02 of theGeneral Conditions with respect to the Project, shall equal theequivalent of twice the amount of the Authorized Allocation.

Thereafter, withdrawal from the Loan Account of the remaining

unwithdrawn amount of the Loan allocated to the eligible Categoriesshall follow such procedures as the Bank shall specify by notice to

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the Borrower. Such further withdrawals shall be made only after andto the extent that the Bank shall have been satisfied that all suchamounts remaining on deposit in the Special Account as of the date

of such notice will be utilized in making payments for eligibleexpenditures.

6. (a) If the Bank shall have determined at any time that anypayment out of the Special Account: (i) was made for an expenditureor in an amount not eligible pursuant to paragraph 2 of thisSchedule; or (ii) was not justified by the evidence furnished to theBank, the Borrower shall, promptly upon notice from the Bank: (A)

provide such additional evidence as the Bank may request; or (B)

deposit into the Special Account (or, if the Bank shall so request,refund to the Bank) an amount equal to the amount of such payment orthe portion thereof not so eligible or justified. Unless the Bankshall otherwise agree, no further deposit by the Bank into the

Special Account shall be made until the Borrower has provided such

evidence or made such deposit or refund, as the case may be.

(b) If the Bank shall have determined at any time that anyamount outstanding in the Special Account will not be required tocover further payments for eligible expenditures, the Borrower

shall, promptly upon notice from the Bank, refund to the Bank suchoutstanding amount.

(c) The Borrower may, upon notice to the Bank, refund to the

Bank all or any portion of the funds on deposit in the SpecialAccount.

(d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b)and (c) of this Schedule shall be credited to the Loan Account for

subsequent withdrawal or for cancellation in accordance with therelevant provisions of this Agreement, including the General

Conditions.

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Schedule 6

Implementation Program

Section I

1. The Borrower shall take all such actions as shall be necessaryto ensure that KMPA shall:

(a) carry on its operations and conduct its affairs inaccordance with sound administrative, financial, environmental andport practices under the supervision of qualified and experiencedmanagement assisted by competent staff in adequate numbers.

(b) operate and maintain its plant, machinery, equipment andother property, and from time to time, promptly as needed, make allnecessary repairs and renewals thereof, all in accordance with soundengineering, financial, environmental and ports practices.

(c) take out and maintain with responsible insurers, or makeother provision satisfactory to the Bank for, insurance against suchrisks and in such amounts as shall be consistent with appropriatepractice.

2. The Borrower shall take all such actions as shall be necessaryto ensure that KMPA shall resettle and rehabilitate the AffectedPersons in accordance with the principles and objectives set forthin Section 3.03 of this Agreement.

3. The Borrower shall take all such actions as shall be necessaryto ensure that KMPA shall produce, for each of the Borrower's fiscalyear after the Borrower's fiscal year ending on December 31, 1995,funds from internal sources equivalent to not less than 20% of theannual average of KMPA's capital expenditures incurred, or expectedto be incurred, for that year and the next following fiscal year.

For the purposes of this paragraph:

(a) The term "funds from internal sources" means theaggregate amount of cash and marketable securities heldat the beginning of the fiscal year plus the difference

between:

- 23 -

(i) the sum of revenues from all sources related tooperations, consumer deposits and consumercontributions in aid of construction, net non-operating income and any reduction in workingcapital other than cash; and

(ii) the sum of all expenses related to operations,including administration, adequate maintenanceand taxes and payments in lieu of taxes(excluding provision for depreciation and othernon-cash operating charges), debt servicerequirements, all cash dividends and other cashdistributions of surplus, increase in workingcapital other than cash and other cash outflowsother than capital expenditures.

(b) The term "net non-operating income" means the difference

between:

(i) revenues from all sources other than thoserelated to operations; and

(ii) expenses, including taxes and payments in lieu of

taxes, incurred in the generation of revenues in

(a) above.

(c) The term "working capital other than cash" means thedifference between current assets excluding cash and

current liabilities at the end of each fiscal year.

(d) The term "current assets excluding cash" means all assetsother than cash which could in the ordinary course ofbusiness be converted into cash within twelve months,including accounts receivable, marketable securities,

inventories and pre-paid expenses properly chargeable tooperating expenses within the next fiscal year.

(e) The term "current liabilities" means all liabilitieswhich will become due and payable or could under

circumstances then existing be called for payment withintwelve months, including accounts payable, customeradvances, debt service requirements, taxes and payments

in lieu of taxes, and dividends.

- 24 -

(f) The term "debt service requirements" means the aggregate

amount of repayments (including sinking fund payments, if

any) of, and interest and other charges on, debt.

(g) The term "capital expenditures" means all expenditures on

account of fixed assets, including interest charged to

construction, related to operations.

(h) Whenever for the purposes of this Section it shall be

necessary to value, in terms of the currency of the

Borrower, debt payable in another currency, such

valuation shall be made on the basis of the prevailing

lawful rate of exchange at which such other currency is,

at the time of such valuation, obtainable for the

purposes of servicing such debt, or, in the absence of

such rate, on the basis of a rate of exchange acceptable

to the Bank.

4. The Borrrwer shall, before September 1 in each of its fiscal

years, commencing on September 1, 1995 and thereafter, on the basis

of financial forecasts, satisfactory to the Bank, review whether the

requirements set forth in paragraph (2) of this Schedule would be

met in respect of such year and the next following fiscal year and

shall furnish to the Bank, through KMPA, a copy of such review upon

its completion. If any such review shows that the requirements set

forth in paragraph (2) of this Schedule would not be met for the

fiscal years covered by such review, the Borrower shall promptly

take all necessary measures (including, without limitation,

adjustments of the structure or levels of KMPA's rates) in order to

meet such requirements.

5. By November 1 of each year, commencing on November 1, 1995 and

thereafter until the completion of the Project, the Borrower shall,

through KMPA, furnish to the Bank, for its review and comments, the

proposed participants and programs for the training activities under

Parts E (iii) and E (iv) of the Project, and, thereafter, implement,

through KMPA, such training activities taking into account the

Bank's comments, if any.

6. By March 31 of each year, commencing on March 31, 1996 and

thereafter until the completion of the Project, the Borrower shall,

through KMPA, furnish to the Bank, for its review and comments, a

report, in form and substance satisfactory to the Bank, on the

environmental impact of the facilities constructed under Part B of

the Project.

- 25 -

Section II

1. The Borrower shall take all such actions as shall be necessary

to ensure that KCTA shall:

(a) carry on its operations and conduct its affairs in

accordance with sound administrative, financial, environmental and

port practices under the supervision of qualified and experienced

management assisted by competent staff in adequate numbers.

(b) operate and maintain its plant, machinery, equipment and

other property, and from time to time, promptly as needed, make all

necessary repairs and renewals thereof, all in accordance with sound

engineering, financial, environmental and ports practices.

(c) take out and maintain with responsible insurers, or make

other provision satisfactory to the Bank for, insurance against such

risks and in such amounts as shall be consistent with appropriate

practice.

2. The Borrower shall take all such actions as shall be necessary

to ensure that KCTA shall produce, for each of the Borrower's fiscal

year after the Borrower's fiscal year ending on December 31, 1995,

funds from internal sources equivalent to not less than 40% of the

annual average of KCTA's capital expenditures incurred, or expected

to be incurred, for that year and the next following fiscal year.

For the purposes of this paragraph:

(a) The term "funds from internal sources" means the

aggregate amount of cash and marketable securities held

at the beginning of the fiscal year plus the difference

between:

(i) the sum of revenues from all sources related to

operations, consumer deposits and consumer

contributions in aid of construction, net non-

operating income and any reduction in working

capital other than cash; and

(ii) the sum of all expenses related to operations,

including administration, adequate maintenance

and taxes and payments in lieu of taxes

(excluding provision for depreciation and other

non-cash operating charges), debt service

- 26 -

requirements, all cash dividends and other cashdistributions of surplus, increase in workingcapital other than cash and other cash outflowsother than capital expenditures.

(b) The term "net non-operating income" means the difference

between:

(i) revenues from all sources other than thoserelated to operations; and

(ii) expenses, including taxes and payments in lieu of

taxes, incurred in the generation of revenues in(a) above.

(c) The term "working capital other than cash" means thedifference between current assets excluding cash and

current liabilities at the end of each fiscal year.

(d) The term "current assets excluding cash" means all assetsother than cash which could in the ordinary course ofbusiness be converted into cash within twelve months,including accounts receivable, marketable securities,

inventories and pre-paid expenses properly chargeable tooperating expenses within the next fiscal year.

(e) The term "current liabilities" means all liabilitieswhich will become due and payable or could under

circumstances then existing be called for payment withintwelve months, including accounts payable, customeradvances, debt service requirements, taxes and payments

in lieu of taxes, and dividends.

(f) The term "debt service requirements" means the aggregateamount of repayments (including sinking fund payments, ifany) of, and interest and other charges on, debt.

(g) The term "capital expenditures" means all expenditures onaccount of fixed assets, including interest charged to

construction, related to operations.

(h) Whenever for the purposes of this Section it shall benecessary to value, in terms of the currency of theBorrower, debt payable in another currency, such

valuation shall be made on the basis of the prevailing

- 27 -

lawful rate of exchange at which such other currency is,at the time of such valuation, obtainable for the

purposes of servicing such debt, or, in the absence of

such rate, on the basis of a rate of exchange acceptable

to the Bank.

4. The Borrower shall, before September 1 in each of its fiscal

years, commencing on September 1, 1995 and thereafter, on the basis

of financial forecasts, satisfactory to the Bank, review whether therequirements set forth in paragraph (2) of this Schedule would bemet in respect of such year and the next following fiscal year and

shall furnish to the Bank, through KCTA, a copy of such review upon

its completion. If any such review shows that the requirements set

forth in paragraph (2) of this Schedule would not be met for thefiscal years covered by such review, the Borrower shall promptlytake all necessary measures (including, without limitation,

adjustments of the structure or levels of KCTA's rates) in order to

meet such requirements.

5. By March 31 of each year, commencing on March 31, 1996 andthereafter until the completion of the Project, the Borrower shall,

through KCTA, furnish to the Bank, for its review and comments, a

report, in form and substance satisfactory to the Bank, on theenvironmental impact of the facilities constructed under Part B of

the Project.

INTERNATIONAL BANKFOR RECONSTRUCTION AND DEVELOPMENT

CERTIFICATE

I hereby certify that the foregoing is a true copy of

the original in the archives of the International Bank

for Reconstruction and Development.

FOR SECRETARY